What is a Point-of-Sale System?
The 30-second definition
A point-of-sale (POS) system is the combination of software and hardware that records a sale, processes payment, updates inventory, and produces a receipt — all in one transaction. “Point of sale” refers to the moment and place where a purchase occurs.
The term is used interchangeably to describe:
- The software (the program that runs the till)
- The hardware (the terminal, screen, and card reader)
- The complete system (software + hardware + payment processing + reporting)
This conflation causes most buyer confusion. When someone Googles “POS system”, they are usually looking for the complete system. When a vendor advertises “POS software”, they are selling the software and charging separately for processing.
POS vs cash register vs payment terminal
Three devices that look similar and are often confused:
Cash register: accepts cash, prints a receipt, tracks daily totals. No inventory management, no customer database, no real-time reporting. Still in use at market stalls and small independent shops. Replaced by POS systems in most contexts.
Payment terminal: the device customers insert or tap their card against. Takes payment. Does nothing else. Your bank or processor provides this. Can be connected to a POS or operate standalone. Examples: Ingenico terminals at supermarkets, the tap reader at a market stall.
POS system: records what was sold (SKU, quantity, modifiers), processes payment (via an integrated or connected payment terminal), updates inventory, links to customer records if applicable, generates reports. The complete operating system for a till.
Most modern POS vendors (Square, Toast, Shopify POS, Lightspeed) provide both the software and the payment terminal in an integrated package. The processing fee (what they charge per transaction) is their revenue model.
What a POS actually does
A full-featured POS system handles:
- Transaction capture: item selection, quantity, modifiers, discounts
- Payment processing: card (via integrated terminal), cash, gift card, split payment
- Receipt generation: printed or digital
- Inventory update: deducts sold items from stock in real time
- Reporting: sales by item, by hour, by staff member, gross margin
- Customer management: purchase history, loyalty points, email capture
- Staff management: login by PIN, permission levels, tip-out calculation
- Integrations: accounting (Xero, QuickBooks), online store (Shopify, WooCommerce), delivery (Deliveroo, UberEats via middleware)
Not every POS does all of these. Square’s free plan handles the first four well. Toast adds restaurant-specific features (kitchen display, table management, online ordering). Lightspeed adds retail-specific depth (matrix inventory, serial number tracking).
The hidden cost: payment processing
The software price is what vendors advertise. The processing rate is what they make money on. Understanding this split is the first step to choosing the right POS.
At £20,000/month card volume:
- Square at 1.75% = £4,200/yr in processing fees
- Toast at 2.49% = £5,976/yr in processing fees
That £1,776/yr processing difference is bigger than Square’s entire annual software subscription at most tiers. Most “POS comparison” content focuses on the software price. This site focuses on the total cost.